TALLINN, June 8 (Reuters) - The European Central Bank kept its money taps wide open on Thursday but dropped a reference to possible interest rate cuts, an unexpectedly hawkish move as euro zone growth accelerates.
Following are highlights of ECB President Mario Draghi’s comments at a post-policy meeting press conference.
DOUBTS RAISED BY NATIONAL CENTRAL BANKS AS TO WHETHER ECB CAN HIT INFLATION TARGETS?
“As regards downward revisions to inflation: in fact, very little has changed with respect to inflation.”
“We removed the easing bias on rates because the tail risks on inflation have disappeared ... if these risks were to reappear, we would certainly be ready to lower rates.”
ECB‘S ASSET PURCHASE PROGRAMME
”I want to emphasise that basically the ECB will be in the market for a long time. When we say (in the statement) the net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme.
”Later on we say that the very substantial degree of monetary accommodation is still needed. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress, we stand ready to increase our asset purchase programme in terms of size and/or duration.
“So the bottom line basically is that the Governing Council trusts the strength and the power of our purchase programme.”
“On the one hand, the current positive cyclical momentum increases the chances of a stronger than expected economic upswing. On the other hand, downside risks relating to predominantly global factors continue to exist.”
“Information ... confirms a stronger momentum in the euro area economy, which is projected to expand at a somewhat faster pace than previously expected.”
“We also see that the uncertainty about the path of inflation has also decreased, so as the output gap closes and the unemployment rate goes down, we are also becoming more confident, that the inflation path will converge toward our objective in a more durable way.”
“Nothing substantial has happened to inflation except the price of oil and the price of food ... underlying inflation has remained the same year to year.”
“I didn’t hear any dissenting voice (at today’s meeting) ... with respect to the (policy) proposals.”
“A full, transparent and consistent implementation of the Stability and Growth Pact and of the macroeconomic imbalances procedure over time and across countries remains essential to bolster the resilience of the euro area economy.”
“In order to reap the full benefits of our monetary policy ... the pace of structural reform needs to be stepped up to increase resilience, reduce structural unemployment and boost productivity and potential output growth.”
ASKED ABOUT POSSIBILITY OF TAPERING ASSET PURCHASES IN SEPTEMBER
“That was not discussed.”
”... At the same time the economic expansion has yet to translate into stronger inflation dynamics.
”So far measures of underlying inflation continue to be subdued. Therefore a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to build up and support headline inflation in the medium term.
“If the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and/or duration.”
“Staff forecasts for annual HICP inflation are 1.5 percent for 2017, 1.3 percent for 2018 and 1.6 percent for 2019. The forecasts were revised downwards.”
“We consider that the risks to the growth outlook are now broadly balanced.”
“Downside risks, mainly related to global macroeconomic developments, continue to exist.”
EMEA News Desk